Hoosiers Loved Themelves a Gas Tax Holiday for 120 Days in 2000

May 3, 2008

By THERESA COOK

As Sens. Hillary Clinton, D-NY, and John McCain, R-Ariz., square off against Sen. Barack Obama, D-Illinois, on a gas tax holiday for the summer -- McCain introduced his legislation in April; Clinton is introducing her bill today; Obama says it's a "gimmick" that offers voters pennies and no long-term solutions -- some Hoosier history may be in order.

Eight years ago, with what were then perceived to be soaring gasoline prices -- more than $2 a gallon for premium gas -- then-Indiana Gov. Frank O'Bannon suspended Indiana's 5 percent sales tax on gas, saving Hoosier motorists between seven and 10 cents per gallon.

"Spiraling gas prices have really caused an undue burden on the people of Indiana," O'Bannon said in June 2000.

O'Bannon used a 1981 statute that enabled him to declare a state of emergency and suspend the tax for up to 60 days. He said he'd reinstate the gas tax before the 60 day period ends if prices went down. If prices continued, he had the option to extended the tax suspension another 60 days.

"Gas prices in the state are causing an undue burden to the people of Indiana," he said. "I consider this an emergency."

Oh -- did I mention O'Bannon was up for re-election?

By July Indiana had the lowest gas prices in the country -- approximately $1.42 per gallon. But O'Bannon said there was no plan to lift the suspension.

"What do we know about next week, will there be a shortage then?" asked an O'Bannon spokeswoman. "We don't know. We're looking at this as a long-term effort."

By August, the suspension had cost the state -- but not consumers -- more than $22 million. O'Bannon renewed the gas tax holiday for another 60 days.

By September, political analyst Charlie Cook had written that "Indiana Momentum is clearly on the side of the Democratic incumbent, Frank O'Bannon, as this much-hyped race moves into its final stages...O'Bannon's decision to suspend the state gas tax for 60 days has resulted in glowing press."

On October 26, 2000, the five percent sales tax resumed.

In November, O'Bannon won.

Indiana GOP chairman Mike McDaniel attributed the gas tax suspension as one of the three reasons the Democrat was re-elected.

Oh -- did I mention that in July 2002, O'Bannon signed into law a 3 cent increase of the state gas tax?